Corruption in Ghana: Causes, consequences and cures

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  • International Journal of Economics, Finance and Management Sciences 2014; 2(1): 92-102 Published online February 20, 2014 (http://www.sciencepublishinggroup.com/j/ijefm) doi: 10.11648/j.ijefm.20140201.20

    Corruption in Ghana: Causes, consequences and cures

    William Agbodohu, Ransford Quarmyne Churchill*

    Department of Accountancy, Accra Polytechnic, Accra, Ghana

    Email address: ransfordchurchill@yahoo.co.uk (R. Q. Churchill)

    To cite this article: William Agbodohu, Ransford Quarmyne Churchill. Corruption in Ghana: Causes, Consequences and Cures. International Journal of

    Economics, Finance and Management Sciences. Vol. 2, No. 1, 2014, pp. 92-102. doi: 10.11648/j.ijefm.20140201.20

    Abstract: The paper stresses the need to keep the issue of corruption squarely in view in the development agenda. It discusses the causes and consequences of corruption, especially in the context of a least developed country with

    considerable regulation and central direction. Lack of transparency, accountability and consistency, as well as institutional

    weaknesses such as in the legislative and judicial systems; provide fertile ground for growth of rent seeking activities in

    such a country. In addition to the rise of an underground economy and the high social costs associated with corruption, its

    adverse consequences on income distribution, consumption patterns, investment, and the government budget and on

    economic reforms are highlighted in the paper. The paper also touches upon the supply side of bribery and its international

    dimensions and presents some thoughts on how to address the corruption issue and to try and bring it under control.

    Keywords: Ghana, Corruption, Economy, Government

    1. Introduction

    There is a growing worldwide concern over corruption at

    the present time. Several factors are responsible for this.

    First, a consensus has now been reached that corruption is

    universal. It exists in all countries, both developed and

    developing, in the public and private sectors, as well as in

    non-profit and charitable organizations. Second, allegations

    and charges of corruption now play a more central role in

    politics than at any other time. Governments have fallen

    careers of world renowned public figures ruined, and

    reputations of well-respected organizations and business

    firms badly tarnished on account of it. The international

    mass media feeds on it and scandals and improper conduct,

    especially of those in high places, are looked upon as

    extremely newsworthy, and to be investigated with zeal and

    vigour. The rising trend in the use of corruption as a tool

    to discredit political opponents, the medias preoccupation

    with it as a highly marketable commodity, and the general

    publics fascination with seeing prominent personalities in

    embarrassing situations have brought scandalous and

    corrupt behaviour, a common human frailty, into the

    limelight of international attention. Third and the main

    issue taken up in this paper, is that corruption can be a

    major obstacle in the process of economic development and

    in modernizing a country. Many now feel that it should

    receive priority attention in a countrys development

    agenda.

    This greater recognition that corruption can have a

    serious adverse impact on development has been a cause

    for concern among developing countries. In a recent

    survey of 150 high level officials from 60 third world

    countries including Ghana, the respondents ranked public

    sector corruption as the most severe obstacle confronting

    their development process (Gray and Kaufmann 1998).

    Countries in the Asia and Pacific region are also very

    worried about this problem and they are in substantial

    agreement that corruption is a major constraint that is

    hindering their economic, political and social development,

    and hence view it as a problem requiring urgent attention at

    the highest level. Increasing public interest and concern

    over corruption have resulted in a large amount of scholarly

    research on the subject. Admittedly, there are still wide

    gaps in the current state of information and knowledge on

    the matter and much more remains to be done. Nevertheless,

    theoretical and empirical research that has been conducted

    thus far has yielded fresh insights into the problem. We

    now have a clearer understanding of the underlying causes

    of corruption, its consequences, and ideas and approaches

    on possible measures to combat it. At the same time, a

    better perspective has been obtained on the reasons why

    corruption persists in so many countries, and why it is

    difficult to deal with, although people throughout the world

    view it with disfavour. This paper presents some ideas and

  • International Journal of Economics, Finance and Management Sciences 2014; 2(1): 92-102 93

    issues that have emerged from the current discussion and

    ongoing debate on the corruption question in the region and

    around the world. It considers the causes, consequences

    and international dimensions of corruption, which seem to

    have generated a lot of public attention in many countries.

    Thoughts and suggestions on possible remedial measures

    have also been included as it would not be a fruitful

    exercise to only discuss issues and problems, without

    coming forward with some solutions as well. The aim of

    the paper is to create greater awareness of the subject and

    to highlight the desirability to keep it in view in thinking

    about development issues, especially in the context of a

    least developed country.

    2. Literature Review

    2.1. Definition

    In this paper, corruption is defined as the use of public

    office for private gain, or in other words, use of official

    position, rank or status by an office bearer for his own

    personal benefit. Following from this definition, examples

    of corrupt behaviour would include: (a) bribery, (b)

    extortion, (c) fraud, (d) embezzlement, (e) nepotism, (f)

    cronyism, (g) appropriation of public assets and property

    for private use, and (h) influence peddling. In this list of

    corrupt behaviour, activities such as fraud and

    embezzlement can be undertaken by an official alone and

    without involvement of a second party. While others such

    as bribery, extortion and influence peddling involve two

    parties the giver and taker in a corrupt deal. The two

    party type of corruption can arise under a variety of

    circumstances. Often mentioned are concerned with the

    following:

    i Government contracts: bribes can influence who gets

    the contract, the terms of the contract, as well as terms of

    subcontracts when the project is implemented.

    ii Government benefits: bribes can influence the

    allocation of monetary benefits such as credit subsidies and

    favoured prices and exchange rates where price controls

    and multiple exchange rates exist. Bribes can also be

    important in obtaining licenses and permits to engage in

    lucrative economic activities such as importing certain

    goods in high demand and in short supply. Moreover,

    bribes can be employed to acquire in-kind benefits such as

    access to privileged schools, subsidized medical care,

    subsidized housing and real estate, and attractive ownership

    stakes in enterprises that are being privatized.

    iii Government revenue: bribes can be used to reduce the

    amount of taxes, fees, dues, custom duties, and electricity

    and other public utility charges collected from business

    firms and private individuals.

    iv Time savings and regulatory avoidance: bribes can

    speed up the granting of permission, licenses and permits to

    carry out activities that are perfectly legal. This is the

    so-called grease money to turn the wheels of bureaucracy

    more smoothly, speedily and hopefully in the right direction.

    It is also not difficult to think of a really awful situation

    where rules and regulations, and the way they are applied,

    are so complex and burdensome that the only way left to

    get things done is to pay money to avoid them.

    v Influencing outcomes of legal and regulatory

    processes: bribes can be used to provide incentives to

    regulatory authorities to refrain from taking action, and to

    look the other way, when private parties engage in activities

    that are in violation of existing laws, rules and regulations

    such as those relating to controlling pollution, preventing

    health hazards, or promoting public safety as in the case of

    building codes and traffic regulations. Similarly, bribes can

    be given to favour one party over another in court cases or

    in other legal and regulatory proceedings.

    3. Economic Rent

    The concept of economic rent (or monopoly profit)

    occupies a central place in the literature on the subject of

    corruption. Economic rent arises when a person has

    something unique or special in his possession. This

    something special can be a luxury condominium in a posh

    neighbourhood, a plot of land in the central business district

    of the city, a natural resource like an oil well, or even some

    pleasing personal traits such as beauty and charm. A person

    who owns such a special asset can charge a more than

    normal price for its use and earn economic rent or

    monopoly profit. To illustrate, suppose there is a young

    lady who has breathtakingly good looks, a charming

    personality, and exceptional acting, singing and dancing

    skills. Due to these special personal assets, she becomes a

    superstar and a heartthrob of teenagers all over the country

    and thus commands a princely sum for her appearances.

    But what exactly is her economic rent? To determine this, it

    is necessary to know the next best thing she can do to earn

    a living if she is not a superstar. Suppose she has a law

    degree so the next best occupation she can take up is to

    become a lawyer. Then the difference between her income

    as a superstar and the earnings she can obtain from her next

    best occupation (as a lawyer), is her economic rent for

    having an unusually pretty face, charm, and superb singing,

    dancing and acting talents a winning combination which

    no other young lady in the country can match.

    A similar line of reasoning can be applied to a minor

    bureaucrat working in the business license issuing office of

    a government ministry. Suppose this bureaucrat has the

    responsibility of typing, stamping the official seal, getting

    the appropriate signatures and delivering the authorization

    letter that grants permission to business enterprises to

    engage in a certain line of economic activity. Business

    executives are anxious to have the letter typed

    expeditiously and correctly, and have it properly stamped,

    signed, sealed and delivered and are willing to pay a price

    for this special service. Hence the bureaucrat who has a

    monopoly of typing, stamping and processing the letter can

    use his official position to acquire economic rent from his

    clients. A useful approach to find out the amount of his

  • 94 William Agbodohu and Ransford Quarmyne Churchill: Corruption in Ghana: Causes, Consequences and Cures

    economic rent is to think of what he can earn if he is fired

    from the licensing office. If the next best thing he can do

    when he loses his government job is to become a taxi driver

    then the difference between his earnings at his new job and

    his intake as a public official is his economic rent. In the

    light of the discussion above, the economic profession

    often refers to bribery, fraud, graft, and other shady deals

    involving misuse of public office as rent seeking

    activities.

    4. Rules, Regulations and their

    Transparency and Consistency

    The conduct of economic and business affairs, like

    engaging in a sporting event such as a football match,

    requires observance of certain rules of the game for

    activities to proceed in an orderly fashion. Rules and

    regulations are required to maintain a sense of fair play; to

    prevent disastrous conflicts; keep greed, predatory and

    other unsavoury human instincts in check; minimize

    socially undesirable consequences; and generally to ensure

    that players and referees abide by certain accepted

    standards of moral conduct and good behaviour. Naturally,

    for rules to be properly observed, they must be transparent,

    that is, must be set out clearly and made known in advance

    to all concerned, so that they can be understood and obeyed

    by participants in the game. The game cannot proceed in an

    orderly way if players are uncertain about what constitutes

    a foul for which they will be penalized, or the referee is not

    sure when to blow the whistle. Aside from being clear,

    rules must also be applied in an impartial manner with

    respect to all players and must be consistent and not be

    subject to frequent and arbitrary changes. Obviously, the

    game will become unplayable and players will pack up and

    leave, if rules keep changing as the game proceeds and the

    referee keeps blowing his whistle whenever he feels like it.

    4.1. Discretionary Powers

    Discretionary powers represent another key concept in

    discussing corruption. They arise because it is not possible

    to devise rules and regulations that are watertight and

    foolproof and will take care of all contingencies that can

    crop up in trying to control or direct an economic activity.

    Hence, some flexibility and discretionary powers will have

    to be given to administrators in interpreting and

    implementing rules. Even in a football match, the referee is

    granted discretionary powers and has considerable freedom

    to exercise his good judgment in reaching decisions such as

    in awarding a penalty kick or showing a yellow or a red

    card to an offending player. These decisions could prove

    decisive in determining the final outcome of the game. To

    elaborate on the above point a little further, consider a case

    involving customs administration. A general rule, let us

    assume, has been established to levy a duty of 50 per cent

    on all consumer electronic goods entering the country. In

    order to implement this rule, customs officials must also be

    provided with some guidance on how to value such goods

    for customs purposes. One foolproof way to take care of

    this problem is to prepare a book that lists the prices of all

    consumer electronic goods that could possibly be imported

    into the country. But there are literally thousands of

    consumer electronic goods and each item comes in a large

    variety of brands, makes, models, characteristics, technical

    specifications and prices. With rapid technological advance

    in this industry, many older models are being discontinued

    due to obsolescence, while new models and entirely new

    products are coming on the market every day. In this

    dynamic context and intense competition that characterizes

    the market for these products, price changes occur

    frequently. Prices of some computer products, for

    example, are known to have nose-dived to unheard of low

    levels within a short period of a few months. Hence, to

    prepare a book that takes account of all these contingencies,

    and that provides a comprehensive, accurate and u...

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